Completed on 20 January 2025
Crédit Mutuel Asset Management is an asset management company of Groupe La Française, the holding company of the asset management business line of Credit Mutuel Alliance Fédérale.
Nature degradation, a systemic financial risk
A recent survey[1] by the European Central Bank (ECB) highlights the impact of ecosystem-service[2] deterioration on the financial stability of the eurozone. It shows that more than 70% of businesses in the region, representing nearly 75% of outstanding bank loans to businesses, rely heavily on at least one ecosystem service.
In this study, the ECB also highlights, through the “feedback loop” concept, the endogenous nature of the Natural Capital related risk[3]. Financial institutions are both highly exposed to activities that depend on ecosystem services and contribute to their degradation by financing activities that put pressure on natural capital, including climate change[4].
Still limited recognition in double-materiality assessments[5] and methodological gaps
Despite the established scientific link between climate change and biodiversity loss[6], and the widely acknowledged negative impact of the banking sector on the climate, banks’ consideration of biodiversity remains, at first glance, relatively limited.
The analysis of the CSRD 2024 reports from a sample of 20 European banks shows that:
- 40% (~ 60% in terms of total assets) consider biodiversity to be "non-material";
- 60% (~ 70% in terms of total assets) believe that biodiversity lacks financial materiality.
Nevertheless, these figures should be interpreted with caution: the absence of measured materiality does not necessarily imply a lack of awareness or action. Rather, according to some banks in our sample, it stems from the lack of maturity of available tools and the complexity of producing standardized data. Despite the abundance of methodologies for assessing biodiversity footprints[7],[8], the highly local nature of the topic[9] presents major challenges. As the Partnership for Biodiversity Accounting Financials (PBAF) reminds us, “data will never be perfect”[10]. These challenges are amplified for banks, which rely on the data provided by their customers. Data is first collected across an exhaustive scope covering different asset classes, and then consolidated.
However, unlike financed emissions, which make it possible to measure the carbon footprint of financial institutions, there is no market standard today for reporting consolidated impacts on natural capital.
Initiatives are still limited, but integration is underway
To date, banks tend to publish preliminary work related to their exposure to the sectors most dependent on or impactful for nature, in particular using the ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure) tool.
While these initial analyses are very useful, their accuracy is limited because the underlying methodology does not use specific geolocation data[11], even though biodiversity is inherently spatial. These exercises represent only one stage of the LEAP (Locate, Evaluate, Assess, Prioritize) approach, recommended by the TNFD (Taskforce on nature related financial disclosures). Their full implementation should enable a more accurate identification of the impacts and risks related to natural capital.
Many banks have also started to integrate natural capital into their strategies through various practices:
- Developing sectoral policies, particularly in high-risk sectors such as agriculture;
- Steering their financing activities, for example by including biodiversity as a project category within sustainable finance frameworks, or by creating dedicated instruments such as debt-for-nature swaps[12];
- Participating in initiatives aimed at developing reporting standards.
While the results of the double-materiality analysis under CSRD must therefore be interpreted with caution, methodological uncertainties should not limit banks’ communications and initiatives, especially now that a seventh planetary boundary has been crossed in 2025[13] and as evidence of the tangible economic costs of nature degradation continues to grow[14], [15],[16].
Prioritizing transparency, despite imperfect data
In the face of urgency, it is essential to prioritize transparency by using existing tools, even if this leads to imperfect measurement. The experience gained from integrating climate-related issues shows that uncertainty is inherent to these long-term processes, and that the pursuit of perfection should not dictate the transparency of sustainability reports.
Indeed, while the first work of the GHG Protocol goes back almost 25 years and the TCFD and PCAF were launched a decade ago, methodological debates regarding climate indicators persist on topics such as the integration and calculation of so called “facilitated” emissions[17], the volatility of financed emissions related to the use of “enterprise value”[18] or the heterogeneity of the methodologies used by data providers to assess physical risks[19].
Climate-related work also offers banks an opportunity to accelerate their understanding and integration of nature issues, (i) by capitalizing on climate-risk assessment models to evaluate nature- related risks or (ii) by exploring the many interconnections between these two topics.
These interconnections[20] rely on a clear understanding of the links between biodiversity and climate risks: for example, nature-based solutions, such as wetland conservation, can reduce the vulnerability of assets to hazards such as flooding[21]. They also involve identifying financing opportunities that generate co-benefits, such as circular-economy solutions that can simultaneously reduce resource consumption and ease pressure on the climate[22].
The release of 2025 CSRD reports - a milestone for the banking sector
Although many banks still see biodiversity as “non-material” within the meaning of the CSRD, they recognize the associated challenges. However, its integration remains embryonic and is hindered by methodological challenges. Overcoming these barriers require more transparency, even if it means disclosing imperfect information. To do so, banks can rely on the experience gained from integrating climate‑related considerations.
At the start of this year, the publication of the 2025 CSRD reports represents a key milestone in assessing banks' ability to integrate nature into their strategy. Looking ahead, methodological challenges will coincide with a reduction in reporting requirements; the new version of the CSRD, combined with the still unfinished revision of ESRS, will narrow the scope of entities subject to the regulation and restrict the volume of data to be disclosed[23].
Supporting banks in integrating nature‑related issues will require strong regulatory involvement. Some regulators have already made this a priority. For instance, the ECB lists nature as one of its supervisory priorities for 2026 - 2028[24].
This commentary is provided for information purposes only. The reference to certain securities is provided for illustrative purposes only. It is not intended to promote direct investment in these securities. The opinions expressed by La Française are based on current market conditions and are subject to change without notice. The information contained in this publication is based on sources considered reliable, but the La Française group does not guarantee that it is accurate, complete, valid, or relevant. Published by La Française Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673, and registered with ORIAS (www.orias.fr) under number 13007808 on 4 November 2016 is a subsidiary of La Française. Crédit Mutuel Asset Management: 128 Boulevard Raspail, 75006 Paris is an asset management company approved by the Autorité des marchés financiers under n° GP 97 138 and registered with ORIAS (www.orias.fr) under no. 25003045 since 11/04/2025. Public Limited Company (Société Anonyme) with share capital of €3,871,680, RCS Paris n° 388 555 021.
[1] ECB, Nature at risk: Implications for the euro area economy and financial stability, 2025
[2] An ecosystem service is defined as a benefit that nature brings to humans
[3] Natural capital refers to the combined value of everything from nature - soil, air, water and all living creatures
[4] IPBES, Nature's Dangerous Decline ‘United '; Species Extinction Rates’ Accelerating ', 2019
[5] Dual materiality is an analytical framework that examines two dimensions of materiality: Materiality of impact and financial materiality (risks/opportunities)
[6] All of the 20 European banks selected in our sample consider climate as a material theme
[7] Finance for Biodiversity, Biodiversity measurement approaches, 2025
[8] AFD, Comparative Analysis of Biodiversity Measurement Approaches for Public Development Banks ,2025
[9] CIRAD (Agricultural research for development) , Indices can reveal biodiversity, 2024
[10] PBAF , Biodiversity Footprinting Standard: Financed Impact, 2024
[11] Still, Data and Methodology Limitations
[12] WEF, Climate finance: What are debt-for-nature swaps and how can they help countries?, 2024
[13] European Commission, Ocean acidification: Seventh planetary boundary now cross, 2025
[14] Ceres, Nature's Price Tag: The economic cost of nature loss, 2025
[15] ECB, Nature at risk: Implications for the euro area economy and financial stability, 2025
[16] EU, Update of the costs of not implementing EU environmental law, 2025
[17] ESG news, ISSB eases Financed Emissions Rules Under IFRS S2, Giving Banks And Asset Managers Reporting Relief, 2025
[18] Columbia Law School, Shocking Financed Emissions: The Effect of Economic Volatility on the Portfolio Footprinting of Financial Institutions ,2024
[19] GARP , A Risk Professional's Guide to Physical Risk Assessments, 2025
[20] UNEP FI, The interlinkages between climate adaptation and nature: An introduction for financial institutions ,2025
[21] UC Santa Cruz, New study values the benefits of mangroves for reducing property damages in recent hurricanes ,2025
[22] PRB, Circular Economy as an Enabler for Responsible Banking, 2024
[23] EFRAG, Draft ESRS E4 Simplified, 2025
[24] ECB, Supervisory priorities 2026-28, 2025
